The Global Youth Unemployment CrisisIts not a new phenomenon that youth employment is hit the hardest in tough economic times. Typically, young people are the "last in" and the "first out" of the workforce throughout an economic slump and recovery.
But the Great Recession has particularly impacted youths worldwide. A recently released report titled "Global Employment Trends for Youth: 2011 Update," published by the UNs International Labour Organization, provides numbers that bring the story into sharp focus.1
Between 2008 and 2009, an unprecedented 4.5 million young people around the globe joined the ranks of the unemployed. This compares to less than 100,000 per year becoming unemployed during the years 1997 to 2007.
This 4.5 million increase represents the largest annual jump in youth unemployment in the 20 years that global data has been collected. This sharp rise has reversed rates that had been declining since 2002.
At the peak of the job shortage in 2009, there were 75.8 million unemployed youth. By late 2010, that number had dropped slightly to 75.1 million. For 2011, that number is expected to drop further to 74.6 million; however, the report suggests this isnt because more young people are finding jobs, but rather it is because more of them are simply giving up on job searching, especially in developed economies.
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While youth unemployment may have dropped on a global scale, in the developed economies and the European Union, the rate continued to climb in 2010.
Long-term youth unemployment in most developed economies is greater than that of adults. A young person in Italy, for example, is three times more likely than an adult to be unemployed for at least one year.
Ireland typifies the crisis. The youth unemployment rate surged from 9 percent in 2007 to 27.5 percent in 2010. What adds to the concern is the estimate that the unemployment rate would actually be 19.3 percent higher if it included those who have given up and reentered the education system or have moved in with parents while waiting for things to improve.
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The withdrawal of youth from the workforce has resulted in a much smaller expansion of the youth labor force than was expected based on long-term trends leading up to the crisis years. Based on available information, 2010 found 2.6 million fewer youth in the labor market across 56 countries than in 2009.
It can be assumed that a significant portion of this 2.6 million became discouraged looking and waiting for prospects of jobs to improve. The conclusion is that the current official youth unemployment rates are most likely a low representation of the true unemployed youth in developed economies.
In developing countries, the situation is even worse. One out of four young people in the Middle East and North Africa is unemployed ? a statistic that has held across the 20 years for which there is data. Even if young people in these and other low-income regions can find a job, they face two additional challenges:
? First, the jobs that are available are typically very low-paying, with long working hours, under poor conditions. ? Second, these jobs offer little promise of leading to better positions, conditions, or pay.
Worse yet, improved education has not fulfilled the promise of decent jobs, and this is fueling the frustration of yet another generation of youth. Undoubtedly, intractable unemployment has been a factor in the mobilization of youth who joined the recent political protest movements in Bahrain, Egypt, Libya, Syria, and Tunisia.
In the U.S., the slowdown of the economy has certainly been the major cause of the rise in youth unemployment. However, there is another contributing factor that could have easily been avoided: the minimum wage increase.
In 2009, economist David Neumark of the University of California, Irvine, warned in The Wall Street Journal2 that when a newly enacted 70-cent-an-hour increase in the minimum wage took effect, it would result in the loss of 300,000 jobs.
The youth unemployment rate jumped from 23.8 percent in July, when the increase took effect, to 25.9 percent in September, reaching the highest level since World War II. In a matter of months, 330,000 jobs disappeared, just as Neumark predicted.
Ever since the 1930s, the best economists have argued that government intervention to set a floor under wages violates lessons learned in Economics 101. An arbitrarily set minimum wage is simply too high to allow many businesses to hire inexperienced young workers. So, this short-sighted government policy ensures that many teens remain unemployed, and consequently, inexperienced.
Regardless of the reason, high youth unemployment means that young people are missing out on the benefits of entry-level positions. This brings up a key point: The downside of being unemployed as a youth is not limited to the short-term problem of not having an income while in high school or college.
Research shows that being unemployed as a youth leads to longer periods of unemployment and lower long-term wages as an adult. A study by researchers at Stanford revealed that even after 10 years, those who were unemployed as teenagers faced lower long-term wages and lower employability.3 Unemployment as a youth can also lead to distrust of the political and economic system, which in turn can lead to depression, drug use, and crime.
In contrast, those who work as teenagers gain distinct advantages, which studies show to go well beyond the wages the jobs pay. Teens gain job experience and in most cases, valuable skills. In addition, they develop a sense of responsibility, learn money management skills, and build a resume. All these factors offer them a better chance of building a successful, productive career.
While higher teenage employment would offer many immediate and long-term benefits to our economy and society, its one of the toughest challenges we face, both politically and economically ? and this crisis is unlikely to resolve itself in the immediate future.
Considering this trend, we offer the following three forecasts for your consideration:
First, until at least 2014, near-paralysis of the global economy will prevent recovery in the youth employment market.
The "no-growth jobs market" will continue to edge out those with less experience, namely youths, as long as more experienced adults are willing to work in lower paying jobs where they tend to be over-qualified. The youth segment will be the last to see employment increases, which will have long-term negative effects on the quality of future labor pools.
Second, in the coming decade, Americas youth unemployment will improve due in part to efforts by private-sector employers, trade unions, and trade associations.
Businesses looking at the ultimate retirement of Boomers will begin to invest in the great untapped potential of todays youth. Not-for-profit consortia like the "Center for America" will help private firms, public entities, and trade associations join forces to enhance the employability of this generation. A big part of this progress will be achieved through training and mentoring programs, as well as apprenticeships and internships. Businesses will benefit as they leverage the talent and abilities of teens who are eager to learn, and youths will benefit not only by getting income and work experience today, but from long-term gains, such as building networks that can lead to future employment.
Third, the government can play a vital role in addressing this issue by removing the restrictive effect of the minimum wage.
With the stroke of a pen, hundreds of thousands of teens could fill entry-level jobs that deliver the long-term benefits of working. However, while only 1.1 percent of full-time employees earn the minimum wage, and most who do so quickly move up to a higher pay rate, the current administration has an a priori commitment to maintaining the status quo. Fortunately, beginning in 2013, the way is likely to be clear for Congress to create a "starter teenage wage" of $4 to $5 per hour. Under this plan, businesses would then be able to afford to hire inexperienced youth. Although teens would make less money per hour, they would benefit from learning how to do a job and gain the self-esteem that goes with supporting themselves in the "real world."
References List : 1. International Labour Office, October 2011, “Global Employment Trends of Youth: 2011 Update.” ⓒ Copyright 2011 by International Labour Organization. All rights reserved. http://www.ilo.org 2. The Wall Street Journal, June 12, 2009, “Delay the Minimum-Wage Hike,” by David Neumark. ⓒ Copyright 2009 by Dow Jones & Company, Inc. All rights reserved. http://online.wsj.com 3. To access the study “Long-Term Consequences of Youth Unemployement,” visit the Stanford University website at: http://economics.stanford.edu
